The IRS is expected to offer some form of tax relief to taxpayers affected by the coronavirus, but accountants already deep into the 2020 filing season are wondering: What’s the holdup?
Treasury Secretary Steven Mnuchin said March 11 that the Trump administration was considering extending deadlines for tax payments and return filings for individuals and small businesses affected by COVID-19 following requests by lawmakers and interest groups to offer relief. By the end of the week, however, President Trump had declared a national emergency and no guidance had been officially issued.
The American Institute of CPAs voiced its concern about the delay in a March 13 statement expressing “dismay” that the IRS and Treasury had yet to provide the promised tax relief.
“The AICPA appreciates the efforts being made by the Treasury Department and IRS to provide relief to the taxpaying public,” the AICPA’s Edward Karl said in the statement. “However, in light of the uncertainty and challenges caused by the spread of the Coronavirus pandemic, we are disappointed that the Treasury Department and IRS have yet to make an announcement on how relief would help millions of individuals and businesses, and to the CPAs who advise them.”
By March 15 the AICPA had begun circulating a memo stating that, following a conversation with Treasury and IRS officials, it anticipates an announcement this week that the April 15 return filing deadline will be extended by up to three months, and that penalties and interest will be waived for most taxpayers.
The IRS and Treasury further indicated that they would be “generous in determining reasonable cause abatement” of penalties related to taxpayers and return preparers unable to file business returns in time for the March 16 return filing deadline, according to the AICPA.
In a follow-up statement to Tax Notes March 16, Karl said the IRS and Treasury officials had not confirmed anything, but that they “are working hard on granting tax [return] filing and payment relief to taxpayers.” He added that the AICPA acknowledges the “extraordinary pressures” Treasury and the IRS are facing and “greatly appreciates their efforts.”
Asked if details of the tax relief plan were forthcoming, the IRS referred Tax Notes to Treasury. Treasury did not respond by press time.
Word on the Street
Joe B. Kristan of Eide Bailly LLP said the lack of detail about tax relief hasn’t had a major impact on his firm’s day-to-day operations, although there have been some concerns, like how to plan for seasonal workers or how to advise clients that expect to have a significant balance due on a tax payment that would ordinarily be due April 15, but whose businesses have dried up over the past month.
“Most small businesses are passthroughs, so that’s a pretty urgent issue that clients and practitioners need to plan around,” Kristan told Tax Notes. “It’s the ones with balances due and no income that are really up against it right now.”
Other tax practitioners were largely unfazed by the absence of definitive information from the IRS and Treasury.
No payments are due for the March 16 business deadline, and while it would be nice to know what will happen to the April 15 deadline, “it’s not really top of my mind,” said Glen Birnbaum of Heinold Banwart Ltd. Taxpayers that expect a refund can go ahead and claim it, and for those that expect they’ll owe taxes, “there’s no sense rushing through this if we’re going to get a grace period,” he said.
Nathan Clark of Dixon Hughes Goodman LLP said that while the lack of clarity is frustrating, his firm has opted to proceed with the normal tax deadlines for now. It’s “business as usual, assuming there is no extension until it’s actually provided,” he said.
Clark said that in the meantime, his firm is staying in close communication with clients to compensate for the uncertainty and to keep them updated.
Not Like This
Knowing that there will be some form of tax relief along the lines of what was suggested in the AICPA memo is better than nothing, but it’s still less than ideal, according to Kristan.
Kristan also said he is bothered that for now at least, he has had to rely on secondhand information from the AICPA, rather than directly from the IRS. “The IRS deals with localized disasters on a regular basis. It doesn’t seem like there should be this silence that we’re getting,” he said.
The type of tax relief being proposed — shifting deadlines and waiving penalties — only seems to involve a few major issues, Kristan observed. And while he acknowledged that the tax code is sprawling and complex, it seems that the agency could at least provide “useful guidance for 90 percent of the situations and then go back to the rest after.”